MARTIN LAKOS, MACQUARIE PRIVATE WEALTH: Yes indeed, Ali. Another down day for the market. We are certainly seeing a fairly volatile week with a big focus on where global bond rates are going. And that certainly is affecting pretty much across the board the market today, with the market down about 59 points. We were down 70 at one stage in early trading, but recovered and just steadied up through the afternoon. BHP down $0.57 to $32.79 and Rio which has fallen quite heavily the last four or five days from a high of $97.30 closed today at $92.01, down 24 cents today. And Fortescue iron ore down $1.69 to $34.10.

The banks couldn't get away without being parred back. ANZ down $0.35 to $28.67, and St George Bank which actually went ex an 82 cent dividend was hit pretty hard, down $1.87. So, not really carrying that dividend to a level of $35.07. And Woodside amongst the energy stocks down 47 cents to $42.68. So, it was pretty broad - the fall today Ali.

ALI MOORE: So Martin, what is happening with global bond rates? Where are they going?

MARTIN LAKOS: We're actually a little bit of background is we are going through a re-balancing. We've been sitting at what we call an inverse yield curve. That's when short term rates, that's official rate set for example here in Australia by the Reserve Bank, that short-term rates are actually higher than long term rates. Now, we've seen a reversal of that. Interestingly, that reversal is actually being exacerbated by the fact that short term rates in the US now are actually starting to go down. Not officially, but the three month rates are falling and the long rates, the 10 year rates, are actually now rising.

And we really are seeing an adjustment back to what we consider a normal position. And what's really driving this is a focus by bond markets, that we're really seeing synchronised global growth taking place with inflation that appears to be reasonably well under control. In fact, the fact that inflation does appears to be under control may be signalling that central banks generally don't need to raise official cash rates at the moment and that's certainly our view with regards to both here in Australia and in the US at this point in time.

ALI MOORE: Not at the moment, but in the longer time there is consensus that there will be a rate rise?

MARTIN LAKOS: Well, that's partially being indicating - being indicated by the bonds if they - if bond yields continue to rise. But the central banks are really going to be focusing on the inflation effect of this growth, and they'll be waiting to see if inflation starts to rear its ugly head, and then they will take appropriate action if that is necessary. The other thing worth noting I think, with regards to these bond rate moves is it does start to really impact stockmarkets, and hence the volatility we've mentioned before Ali, is really taking place. And we 're starting to see sector rotation in the markets as a result of that.

ALI MOORE: Well, how much further has it got to go, how close are we to this re-balancing being complete?

MARTIN LAKOS: Well if we are, you know, looking at short term rates it may well be that this move is fairly limited. We've done quite a bit of work on past bond markets re-balancing. In fact we've gone back to January 1994, and in the Australian market the sectors that out perform and underperform during these periods is quite interesting. Probably what you would expect of the diversified resources, so certainly the shorter term cyclicals tend to out perform, so resources, energy, transport and media are reasonable performers during these adjustment periods.

The negative, or the sectors that don't perform, are really the longer duration defensive sectors, such as utilities, infrastructure stocks, telcos, and to a lesser extent the banks. In fact the banks, interestingly, sit pretty much in the middle of the range. So, the range has been an out performance of 19 per cent on the upside from resources and about 16 per cent underperformance by utilities and infrastructure. And that's really the adjustment we're starting to see take place in the Australian market.